Mortgage lenders and servicers with large portfolios of seriously delinquent home loans have turned to “liquidating trust” structures as a financing alternative – with good results, according to credit rating agency DBRS. So far, the performance of six nonperforming loan securitizations with 14 outstanding tranches rated by DBRS has been stable and largely within expectations at the time of rating, said Quincy Tang, the rating agency’s senior vice president of structured finance. As of Sept. 6, all rated classes of one transaction (Residential Loan Trust 2008-2) have been paid in full, said Tang. The Class A notes in...

With the mortgage finance industry in turbulence and a fast-changing regulatory landscape, banks have been forced to reevaluate how they optimize processes and become more cost-efficient, making “operational certainty the need of the hour,” according to an expert at a webinar held this week by NelsonHall. The market is seeing an increase in defaults but a decrease in mortgage originations, noted Sandip Sahni, practice head of business process services at Tata Consultancy Services. This has led to mortgage providers having to deal with fluctuations in volume and costs, and in response, service providers are creating more...

State regulators are gradually working through the pile of licensing applications submitted by mortgage companies and loan originators. The total number of unique entities holding state licenses increased 7.2 percent during the second quarter, reaching 140,421, according to an Inside Mortgage Trends analysis of data from the National Mortgage Licensing System. The vast majority of those licenses (76 percent) are held by individual loan officers. Regulators still had some 35,024 licensing applications pending at the end of June, but that was down 23 percent from the previous quarter. And the number of new applications submitted during...

One of the primary sponsors of mortgage refinance legislation pending in the Senate told colleagues this week that her legislation could save homeowners and Fannie Mae and Freddie Mac tens of millions of dollars, while acknowledging that it could cost the Federal Reserve billions of dollars in lost investment income. Testifying on behalf of her legislation before a Senate subcommittee on Wednesday, Sen. Barbara Boxer, D-CA, said S. 170, the Helping Responsible Homeowners Act of 2011, “would result in up to 54,000 fewer defaults and produce a net savings up to $100 million for Fannie and Freddie.” Homeowners would see immediate relief. “A one and a half percent reduction in...

Fitch Ratings has finalized its new residential MBS loan loss model, with several additional enhancements designed to better address risks that drive defaults and losses, such as a new variable known as “sustainable loan-to-value,” which represents a borrower’s effective equity in the property. “When gauging credit risk for new U.S. residential mortgage loans, borrower equity is key,” explained Kevin Duignan, group managing director and head of U.S. structured finance for Fitch. “The core principle underpinning the framework is the interaction between borrower equity and market value declines in determining expected loss for...

Even as industry observers agree that the White House’s announced attempt to improve refinance efficiency through an expansion of the Home Affordable Refinance Program is worthwhile, there remain too many unknowns at the moment to judge how effective a HARP makeover will be. As part of his much anticipated speech before a joint session of Congress last week, President Obama noted his administration’s intent to help homeowners. “To help responsible homeowners, we’re going to work with federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4 percent,” said Obama. “That’s a step that can...

Goldman Sachs will likely have no appetite to wade back into the mortgage servicing business anytime soon, following the enforcement action taken against it last week by the Federal Reserve Board – a regulatory move that still leaves monetary penalties on the table and likely to be imposed before long. The action orders Goldman Sachs to retain an independent consultant to review foreclosure proceedings initiated by Litton Loan Servicing LP, Goldman’s former mortgage servicing platform, that were pending at any time in 2009 or 2010. The review is intended to provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process, according to the Fed.

The Stauffer and Nathan, P.C. law firm of Tulsa, OK, recently filed a federal class action in the U.S. District Court of the Northern District of Oklahoma against Wells Fargo and Experian, Equifax and Trans Union. The complaint accuses Wells of engaging in illegal mortgage servicing practices and “ramrod unlawful foreclosures” and alleges the major credit bureaus participated in erroneous credit reporting due to their “reckless failure to conduct independent investigations and just parroting the false and negative information supplied to credit bureaus by Wells Fargo.” The plaintiffs contend Wells Fargo “continues to engage in a free-for-all campaign to harass and disparage Oklahoma homeowners with unjustified foreclosure proceedings.” They also claim abuse of process, malicious prosecution, intentional infliction of emotional distress, and numerous violations of state and federal consumer protection statutes.

The Federal Housing Finance Agency’s legal action late last week against many of the nation’s largest financial institutions on the grounds they misled Fannie Mae and Freddie Mac about the quality of subprime and Alt A MBS purchased by the government-sponsored enterprises has few positives but plenty of negative potential consequences for the market, experts say. The 17 separate lawsuits filed by the FHFA seek unspecified damages on $196 billion in mortgage securities the two GSEs purchased, mostly between 2005 and 2008. The agency conducted extensive loan-level reviews that allegedly revealed widespread discrepancies between... [Includes two pages of data]

Private investors in agency MBS could lose $13 billion to $15 billion from a new government effort to help current Fannie Mae, Freddie Mac and FHA borrowers refinance, according to a new Congressional Budget Office staff working paper. The Obama administration is expected to announce a revved-up refinance program as part of a new strategy to strengthen economic growth. A “stylized” refinance program analyzed by the CBO would have a relatively small impact on the overall economy, the analysts said. The biggest impact would be on private MBS investors and the estimated 2.9 million households that would likely be brought into the...